Insured Warranty vs. Non-Insured Warranty

When you’re shopping for a new car, you’ll be faced with a range of options when it comes to warrantees. Warrantees differ in a host of ways, but among the most important of these differences concerns the way that they are backed. Some warrantees are backed by insurance, provided by companies like ALA; others are not. So, what does this mean in practice?

Regulation

Insurance-backed warrantees are overseen by the Financial Conduct Authority, in much the same way as banks and insurers. After all, this is a financial service being provided. This is not to say that non-insured warranty providers are able to do as they like; they still must comply with the law regarding trading standards. But it does mean that insurance-backed warrantees must pass a more stringent examination from an impartial third party, under threat of legal action.

Redress

In the case of an insurance-backed warranty, it’s easier to seek a legal remedy if you feel that you’ve been mis-sold a policy that you wouldn’t have invested in, had you been fully aware of the facts. By contrast, non-insured warrantees risk leaving you high and dry.
If you want to make a complain, then you’ll usually turn to the Financial Ombudsman Service. They’re an impartial government organisation with the power to tell an insurance-backed provider that they need to deal with the situation. There’s no impartial outside body of this kind for non-insurance-backed warrantees.

Cost

The business models used by non-insured and insured providers are quite different. The latter face costs that the former don’t have to contend with – which means that they can be more competitive on pricing. Whether this is ultimately worthwhile will depend on the judgement of the customer.

Speed

While and insured warranty provider might be able to make an immediate decision on whether a repair is covered, they may have to wait for the funds to be released by the underwriter. This might mean that you need to spend a few weeks waiting for the vehicle to be repaired. A non-insured provider, which provides the repair in-house, enjoys greater autonomy, and will be able to get your back onto the road.

What if the Company Goes Bust?

If your warranty provider goes under, and there’s no insurance in place to pick up the pieces, then you’ll be left without cover or compensation. In the case of an insurance-backed warranty, you’ll be covered even if the insurer goes under: you can claim compensation through the Financial Services Compensation Scheme.